Beware of changes to your Section 20 specification for major works

/ Agents, Blocks of flats, Freeholders, Landlords, Leaseholders, News

Planning and overseeing major works at a property is always going to involve a lot of work.  You cannot avoid it altogether, but having the right professional help at the outset can help make life much easier.

Get it wrong and make substantial changes without going through the correct process for example, and you might have a legal dispute on your hands.

This could happen even if the works undertaken were necessary or even offered a better end result.  Go to court and you may even win such a case, but only after potentially costly legal advice and the time consumed to pursue it.

A case in point, which found in favour of the landlords following an appeal last summer, involved tiling works on a spectacular North London rooftop terrace, where mature shrubs were watered by an irrigation system.

Underneath the asphalt terrace the roof needed repairing.  This meant that tiles, which had been placed on the roof by leaseholders, also had to be removed and it was proposed that they should be replaced.  The work was specified and a Section 20 consultation set in motion.

However, the management company then discovered that the steps proposed would invalidate the guarantee offered by the roofing contractor and a pedestal system, that created a space between the roof top and tiling, was installed.

At the end of the day, another £30,000 was added to a bill for works that already exceeded £300,000.  Leaseholders of the two penthouse suites in the building objected.

They believed that Stage 2 of the Section 20 consultation process (a Notice of Estimate) should have been repeated when the specification changed to include the pedestal system.

In this case the Country Court and, subsequently, the Court of Appeal decided in favour of the landlords, noting that other leaseholders in the building did not object and that adequate information had been provided.   Other complaints, including one that the builders hadn’t watered their plants while the irrigation system was switched off, were also found to be unreasonable.

A lot of time, money and effort later – on the part of all the parties involved – and the moral of this tale is to get the specification right at the outset, probably with the help of a professional building surveyor and to allow plenty of time for Section 20 Consultation.  Not least, be open to repeating stages of the process if the original building works specification changes.

Taking the case above, for example, life may have been much simpler for all involved if Stage 2 of the process – a Notice of Estimate – had been repeated.

What  does Section 20 Consultation Process mean?

Leaseholders paying variable service charges must be consulted before a landlord carries out qualifying works or enters into a long-term agreement for the provision of services.

The original regulations on this, under Section 20 of the Landlord and Tenant Act 1985, were updated by Section 151 of the Commonhold and Leasehold Reform Act 2002 to set out the precise procedures landlords must follow. The process is still known as “S20” or “Section 20”.

The Section 20 consultation process applies to maintenance works which are going to cost any individual leaseholder more than £250 and long-term agreements, for example, gardening or maintenance contracts, which will cost any one service charge payer over £100 a year. Section 20 Consultation generally has three stages and you need to allow ample time for each:

  • A Notice of Intention
  • A Notice of Estimates
  • A Notice of Award of Contract

You can find out much more about Section 20 and major works on the government funded Leasehold Advisory Service website simply enter ‘Section 20 and major works in their search function.

 

The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Deacon accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.

 

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